U.S. Bankruptcy Judge K. Rodney May officially entered his ruling that converts the Colony Beach & Tennis Resort bankruptcy case to a Chapter 7 liquidation on March 21, with one change from the oral ruling he made in February.
May announced that Colony Lender LLC, the bankruptcy case’s largest affected creditor, was an unsecured creditor in its $3.7 million claim against longtime Colony owner Dr. Murray “Murf” Klauber’s Chapter 7 Partnership estate.
But May made Colony Lender a secured creditor up to $3.7 million in his March 21 written ruling, noting that past case law confirms his decision.
The ruling alteration means that Colony Lender will collect the first $3.7 million of any offer that Chapter 7 U.S. Bankruptcy Trustee William Maloney accepts for the rights to a $25 million judgment that was awarded to Klauber in a U.S. Appeals court. That judgment was awarded against the Colony Beach & Tennis Resort Association for the failure of unit owners to pay assessments, which a judge said led to the closure of the resort in 2010 and damages.
The judgment, which is owned by Maloney as the trustee in the Chapter 7 case, can be sold to a developer or outside interest. The ruling, though, doesn’t prevent the association from trying to negotiate a settlement with Maloney so unit owners are not assessed in the future for the $25 million judgment, which would cost unit owners more than $100,000 each to pay.
The association, though, has more than $10 million in counter-claims it can utilize against Klauber’s Chapter 7 estate.
The rest of May’s written ruling was the same as his oral ruling. May dismissed a proposed Colony bankruptcy reorganization plan and, in doing so, also rejected a Colony settlement that was in the works for months.
As part of his ruling, May will also allow Colony Lender LLC — the case’s largest affected creditor — to hold an auction of its assets in Sarasota at a date yet to be determined. Now 2.3 acres of Colony property, which includes the tennis courts, restaurant and other recreational amenities, will be bid on at an auction.
Contact Kurt Schultheis at email@example.com.